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index fund or etf
Old 03-14-2015, 07:19 AM   #1
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index fund or etf

Can anyone tell me the difference between an index fund and etf? If etf's are index funds, which is better? Have you heard about the Schwab
Intelligent Portfolio of etf's where everything is done on the computer? The person chooses funds, rebalances and does everything on computer without any fees. I retired in January from postal service and want to move my 401 from employer. The TSP savings at postal service has low fees but think I should move it from there. THANKS
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Old 03-14-2015, 09:47 AM   #2
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etf's while index funds can trade at a premium or discount to the nav while the mutual fund does not.

you can sell etf's short too.

while equity etf's have such a tiny spread usually that is not true of bond etf's.

the same bond index can trade at a noticable spread as an etf as well as be more volatile because of short selling.

usually stock etf's are not a problem but i much prefer bond funds as opposed to the etf version. buying at a premium when rates fall and selling at a discount when they rise can worsen performance.
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Old 03-14-2015, 10:25 AM   #3
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ETF - Exchange Traded Fund
Exchange-Traded Fund (ETF) (SPY,IWM,DIA,QQQ,XLE,XLF,IYR,OIH,BBH,USO,GLD,SLV,U NG)
An ETF trades like a stock, meaning the price changes throughout the trading day. The ETF can be based on an index strategy, but it does not in all cases.

MF - Mutual Fund
Mutual Fund Definition | Investopedia
A mutual fund consists of a portfolio that is managed to match an index, or some other criteria set by the managers.

So, your question about an index fund or ETF is understood to mean, "Which is better, an indexed mutual fund or an indexed ETF?" The answer is, it depends...there is no right or wrong answer. Just need to find what fits your needs.

Schwab's intelligent portfolio is discussed in other thread around here. I don't have the link handy.

It sounds like someone is trying to sell you on moving from your mutual funds to Schwab...and telling you the ETFs are superior. It is not that easy to define, and requires more understanding.

A lot of people have faith in the TSP, so I wouldn't be quick to move out before examining all the details of the next institution and their plan.
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Old 03-14-2015, 12:30 PM   #4
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I am a retired fed (8 months ago). I am leaving my money in the TSP. Nobody has anywhere close the low fees of the TSP, and for me, I have all the investment choices and fund selections I will ever need. The ONLY negative with the TSP as far as I'm concerned is the limited selection of withdrawal options. That issue is the one that might come closest to making me consider rolling into an IRA. However, there are strong rumors that some changes are on the horizon to increase the withdrawal options within TSP, so I'm anxiously awaiting that improvement. That's all that's needed, in my opinion to make the TSP perfect...for my purposes anyway.

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Old 03-14-2015, 12:41 PM   #5
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Thanks MartyB, I did not know the TSP had limited withdrawal options. I thought monthly, quarterly or whenever you wanted to withdraw was allowed. Never heard different before.
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Old 03-14-2015, 01:31 PM   #6
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You can set up to receive monthly withdrawals of the same amount each month, which can be increased or reduced just once a year at end of the year. Or....you can take an initial partial or full withdraw when you retire. If you do the paritial, you can also begin the monthly withdrawals if you want to. Or....you can choose to take an annuity with part or all of your funds. Or...you can do a combination of these things. Or....you can elect to take monthly payments based on your life expectancy (similar to 72t). Or....you can do nothing, which is what I've done so far. I also recently learned that if you take a job after retiring and still have your TSP, and your new employer has a 401k to which you contribute, you can roll those funds into your TSP when you stop.working. Not sure how this is affected if you have begun TSP withdrawals. There are several options, but the main one that bugs me that is missing is that I can't go in at any time I want/need to and withdraw $3000, $5000 etc. If TSP can make some kind of tweak to allow that, then I would never consider leaving the TSP.

Almost forgot a real biggie for me. If I am currently taking monthly withdrawals and the market tanks, I can't stop or even reduce the payments for the remainder of that year. That's a huge disadvantage to me. I'd rather reduce my spending for awhile than suck the life out of my portfolio. Hopefully TSP will make some changes soon in these areas.

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Old 03-14-2015, 02:05 PM   #7
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Originally Posted by snowball View Post
Can anyone tell me the difference between an index fund and etf? If etf's are index funds, which is better? Have you heard about the Schwab
Intelligent Portfolio of etf's where everything is done on the computer? The person chooses funds, rebalances and does everything on computer without any fees. I retired in January from postal service and want to move my 401 from employer. The TSP savings at postal service has low fees but think I should move it from there. THANKS
Here's the thread about Schwab's Intelligent Portfolios. It doesn't look good IMO. Why are we all so afraid to manage our own investments , myself included?

Schwab Intelligent Investor Portfolios Now Open for Business
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Old 03-15-2015, 06:18 AM   #8
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i retire from fed in 5 weeks. I have researched all this too and my plan is to leave the bulk in tsp but take a lump sum of 50k and move to my ira. the remainder of the tsp will ride until i'm 70.5, when i must start withdrawal. the 5ok in ira will be my go to fund if i need extra cash. i don't expect that to be needed. (my tsp is in the l income fund, but i am consideriously considering moving half of that to C fund.)
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Old 03-15-2015, 06:23 AM   #9
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i retire from fed in 5 weeks. I have researched all this too and my plan is to leave the bulk in tsp but take a lump sum of 50k and move to my ira. the remainder of the tsp will ride until i'm 70.5, when i must start withdrawal. the 5ok in ira will be my go to fund if i need extra cash. i don't expect that to be needed. (my tsp is in the l income fund, but i am consideriously considering moving half of that to C fund.)
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Old 03-15-2015, 06:46 AM   #10
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I would favor an ETF over a open ended mutual fund.
Many open ended funds have restrictions on frequent trading, also the transaction only happens once per day. ETFs can be traded as many times as needed any time of the day.
Check the expense ratio for any fund being considered.
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Old 03-15-2015, 06:53 AM   #11
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A few comments on the various topics in this thread.

1. ETFs vs index funds: Bogleheads has a good article: ETFs vs mutual funds - Bogleheads

2. TSP is great: It seems that some have worried about when a periodic withdrawal plan is set that they are forced to withdraw even if the market is low. So what? If you are not going to spend the withdrawn money, just invest back into the same kinds of funds in a taxable account. That is buy low. Yes, you have to pay taxes on the withdrawn money, but you would have anyways.

3. Schwab and other robo-advisors: The appeal of these places is that they will do tax-loss harvesting for you in a taxable account. Otherwise, one might as well use a Target Retirement fund or LifeStrategy fund of index funds. Since the OP is writing about a tax-advantaged account, no TLHing is possible and thus these robo-advisor accounts have no benefit over a less complicated TR or LS fund. The TSP has some L funds that do this job, so probably no need to even leave the TSP if one wants simple.

And the Schwab product is not free. They are pretty upfront about how they make money off of clients and how the expenses are paid by reduced portfolio performance. It is kind of like the expense ratios in Vanguard mutual funds, except you know what the audited expenses ratios of Vanguard funds are. You will not know what the expense ratios for the Schwab product are.
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Old 03-15-2015, 12:23 PM   #12
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And the Schwab product is not free. They are pretty upfront about how they make money off of clients and how the expenses are paid by reduced portfolio performance. It is kind of like the expense ratios in Vanguard mutual funds, except you know what the audited expenses ratios of Vanguard funds are. You will not know what the expense ratios for the Schwab product are.
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Old 03-15-2015, 02:40 PM   #13
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Can anyone tell me the difference between an index fund and etf? THANKS

Some ETFs are index funds, some are not.

ETFs are becoming more like mutual funds.

In general, fees are lower on ETFs than mutual funds.

Also in general, fees are lower on index funds than "exotic" ETFs.


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Old 03-20-2015, 05:54 PM   #14
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Can anyone suggest a good portfolio with Vanguard for safety and maybe growth?
THANKS
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Good Portfolio
Old 03-20-2015, 05:56 PM   #15
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Good Portfolio

Can anyone suggest a good portfolio with Vnguard for safety and maybe growth? How much or what percent should go where?
THANKS
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Bond fund, TIPS, the less volatile
Old 03-20-2015, 06:22 PM   #16
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Bond fund, TIPS, the less volatile

Another request for advice, opinion. Can anyone advise about the less volatile, safe funds? Which is best? Bonds, Securities, Cash, Tips? How many in the safer category are there to choose from? Which one to be safe and maybe grow?
THANKS AGAIN
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Old 03-20-2015, 06:51 PM   #17
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Can anyone suggest a good portfolio with Vnguard for safety and maybe growth? How much or what percent should go where?

THANKS

This vanguard page is very useful.
https://personal.vanguard.com/us/fun...recommendation
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